Workers’ Compensation Woes

The government's program to support federal employees injured on the job hasn't changed in nearly four decades, and some say that workers' compensation benefits are due for an upgrade. But as reform proposals languish, the program continues to place an unnecessary burden on agencies.

Under the 1916 Federal Employees' Compensation Act, employees disabled as a result of an injury 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.

Workers' compensation is particularly problematic at the U.S. Postal Service, the program's largest participant. A recent audit from the USPS inspector general found that the cash-strapped agency loses $335 million annually due to program inefficiencies. For example, FECA beneficiaries are reimbursed for name-brand drugs and are not subject to time limits for collecting payouts. The Postal Service also is providing benefits for workers who have no intention of returning to their jobs - more than 2,000 postal employees on the workers' compensation roll earlier this year were 70 years of age or older.

A number of proposals in the works would overhaul the program and save the government money, though the impact on beneficiaries is up for debate.

Rep. John Kline, R-Minn., in July introduced a bill to streamline the claims process, update the benefits available to government employees and improve accountability for federal agencies. To boost efficiency, the Labor Department, which oversees the program, would be allowed to verify federal employees' salaries against Social Security Administration data and collect administrative fees from employing agencies. The bill passed out of committee following a markup this summer.

Sen. Susan Collins, R-Maine, in February sponsored legislation that would convert employees on workers' compensation to the appropriate retirement system when they reach retirement age. Witnesses at a July subcommittee hearing on the bill expressed concern that the measure would result in a loss of income for many of those employees. There has been no movement on the proposal.

Labor also has weighed in, recommending a uniform compensation rate of 70 percent for all claimants and a "conversion entitlement benefit" for FECA recipients when they reach Social Security retirement age that would reduce their wage-loss benefit to 50 percent of their gross salary at the time of injury, but keep it tax-free.

FECA provides basic compensation and medical rehabilitation for government employees who are hurt at work and benefits for surviving dependents in cases of job-related deaths. It covers 2.7 million federal employees and postal workers and from July 1, 2009, to June 30, 2010, paid out $2.78 billion in benefits.

Helping Hand

The current pay freeze on federal workers isn't making anyone's day, but the National Treasury Employees Union wants to help. NTEU on Wednesday announced a donation of $32,317.67 to the Federal Employee Education and Assistance Fund, a nonprofit agency that provides financial assistance to struggling federal workers.

The funds, announced by NTEU President Colleen Kelley during a press conference on the impact of potential budget cuts at the Internal Revenue Service, come from money left over after payment in full of all claims and administrative expenses from an $178 million settlement of a class action lawsuit against the government for 212,000 federal employees who did not receive due pay raises.

"Federal employees are struggling with economic challenges along with their fellow Americans," Kelley said during the conference, mentioning in particular the pay freeze as well as recent natural disasters that have affected the homes and livelihoods of federal workers. FEEA provides up to $1,000 in noninterest loans to families of civil servants.

News of the donation comes at a time when the IRS, whose workers NTEU represents, is facing proposed budget cuts of more than $600 million from current levels in the House, and more than $450 million in the Senate. The potential decreases would put IRS funding at $1.8 billion and $1.6 billion less than the White House request, respectively. NTEU is strongly opposed to the proposals.

Kelley said the FEEA donation had been gestating for a while, and is separate from the union's efforts to fight IRS budget cuts.

CLARIFICATION: The original version of this story was unclear on the source of the money for NTEU's contribution to the employee assistance fund.