Federal workers’ comp program needs upgrade, panel says

The government's compensation program for federal workers injured on the job is too generous and should be reformed so that employees receive less benefits and return to work faster, some witnesses at a House hearing said Wednesday.

Under the Federal Employees' Compensation Act, employees disabled on the job can receive 66 2/3 percent -- or 75 percent for those with dependents -- of their basic salary tax-free, plus medical-related expenses. The 66 2/3 percent rate is comparable to most state systems, but many federal recipients, including those past retirement age, receive the 75 percent compensation rate. There is no age limit for receiving FECA benefits.

"FECA has become a retirement plan for thousands of federal employees because FECA pays out better," said Rep. Dennis Ross, R-Fla., chairman of the House Oversight and Government Reform Subcommittee on the Federal Workforce, U.S. Postal Service and Labor Policy. "FECA was never intended to be a retirement plan."

The Labor Department, which administers FECA, is recommending a uniform compensation rate of 70 percent for all claimants. "At this level compensation would remain quite adequate," said Gary Steinberg, acting director of the department's Office of Workers' Compensation. Steinberg said the proposal would affect only new injuries and claims, not current ones. He estimated the savings could be more than $400 million during the next decade.

Steinberg said Labor also is proposing a "conversion entitlement benefit" for FECA recipients when they reach Social Security retirement age that would reduce their wage-loss benefits to 50 percent of their gross salary at the time of injury, but keep it tax-free. "This benefit more closely parallels a regular retirement benefit, as opposed to a full wage-loss benefit, so that FECA recipients are not overly advantaged in their retirement years compared to their noninjured counterparts on OPM retirement," Steinberg said.

FECA provides compensation for wage loss and medical care for those injured or killed on the job, helps employees return to work, and pays benefits to survivors. It covers 2.7 million federal employees and postal workers, and paid out $1.9 billion in wage-loss compensation, impairment and death benefits, and $898 million in medical and rehabilitation services and supplies during the 2010 chargeback year, which ended on June 30, 2010. The funds are paid out of the Employees' Compensation Fund, and most agencies repay the money. Benefits have remained relatively stable at those levels during the past decade, said Steinberg. Administrative costs for operating the program account for about 5 percent of expenditures.

The current FECA scenario, in which many recipients receive the 75 percent compensation rate, "lends itself to abuse," said Lisa McManus, president of CCS Holdings, a consulting firm that specializes in workers' compensation claims. She suggested a standard 66 2/3 percent compensation rate for all recipients.

While witnesses and lawmakers generally agreed FECA, which has not been amended since 1974, should be reformed, not everyone agreed that reducing compensation benefits was the way to do it.

"The changes we would like to see are the changes that would improve the claims process," said Milagro Rodriguez, an occupational health and safety specialist for the American Federation of Government Employees. "The changes that would result in employees getting the medical attention they need sooner so they can return to work sooner." Rodriguez said the claims process is too lengthy and often requires a burdensome level of red tape for the employee.

But Steinberg said the average claim is processed within 16 days. He said 85 percent of claimants return to work within the first year of injury, and 89 percent return to work by the end of the second year.

Labor also is seeking permanent authority for the Assisted Reemployment program, which aims to help disabled federal workers find jobs in the general workforce, and provides wage reimbursement to potential employers. Other proposals include increases to benefits for funeral expenses and facial disfigurement.